Liz here, with your weekly Money Calendar Friday trade from Tom Gentile and his Ghostbusters team. Big wins on large, liquid ETFs – what better way to slide into the weekend?
On my own weekend agenda, I’m picking up my wedding dress tomorrow, which set me back a cool $800. (It has pink under the skirt because I’m very extra.) I’ll be at Kenny Glick’s money-making live earnings event next week with bells on. (Sign up here if you haven’t yet.)
Today’s Money Calendar trade is courtesy of Janet Yellen, the long-suffering Treasury secretary who just single-handedly raised our debt ceiling.
I’ve had a soft spot for Janet Yellen for years. Marty Fartman, the unhinged hedge fund manager who made me throw up the burrito, absolutely hated her. He called her a “hobbit” and reviled her fiscal policy.
(Marty also attempted Krav Maga once at a routine traffic stop. It went about as well as you’d expect.)
Despite the vitriol of people like Marty Fartman, Janet soldiers on (something I’ve always deeply admired about her). And now – pending House approval – she’s convinced our government to raise its debt ceiling by $480B so we won’t default on our massive bills…at least until December.
In Tom’s words, “Congress finally pulled their head out and decided to listen to US Secretary of the Treasury Janet Yellen about the debt ceiling concern. I’ll let you decide from where or what they pulled their heads out of.”
Wherever that place was, involved a whole lot of bullish. (The Dow’s up 1.35% over the past week.)
That means Tom’s slightly bullish, too…for the moment.
And he’s got an easy trade that can net you an extra $110 over the next 8 trading days.
Here’s Why Tom’s Dipping His Toe in Bullish This Week
“Consumer Discretionary” is all those things that you buy when you have discretionary income. Cars, household goods and apparel, hotel stays and movie tickets. Toxic “uranium glass” from the turn of the century that glows under a blacklight. Oh, that’s just me? Sorry.
The Consumer Discretionary Select Sector SPDR Fund (NYSEARCA:XLY) is the large, liquid ETF that tracks all those things. And Tom, in turn, is tracking it.
(Who is tracking Tom? No one knows.)
“The gains on the day have the major averages in the green for the week,” Tom explains. “But I am hesitant to say I am full on bullish, as October is living up to its reputation thus far as being one of, if not the most volatile month.”
The tendency in the markets these past couple of weeks is a slide for the major indexes. Those indexes notch gains intra day and then sell off in the last half hour to hour.
And that has Tom a little leery.
“The strong gain yesterday was even sold off – it did not result in a bearish day, but I would have liked to see it, the SPY, DOW or NASDAQ close closer to its highs of the day,” he says.
I mean, we all have wishes. (I’m sure Janet Yellen would like people to listen to her before the nation was teetering on the brink of default.)
But sometimes we have to settle for imperfect reality…
“Though I may not be fully in the bull camp, I am not opposed to putting my toe in the water on some bullish setups, like the one I see in XLY.”
Here’s the chart that Tom’s Option Tools – part of the Money Calendar suite – are showing him right now:
And here’s Tom explaining exactly what it means:
“I see a double bottom support at the price of $178.
“XLY bounced off that support now a second time and is closing above the 50-day Simple Moving Average (SMA), highlighted in the chart image by the orange arrows.”
That little bounce means a nice “Nickel Slots” $110 for you – just enough to throw back into the Consumer Discretionary sector on dinner and a movie.
(Tom’s also got a Dollar Slots play for you, because he’s a true gentleman who would never call anyone a hobbit.)
Cash in on A Low-Stress XLY This Month and Next (Thanks Again, Janet)
Tom’s “Nickel Slots” idea is a Sell to Open a Put Credit Spread, a bullish-to-neutral hedging strategy that involves selling and buying puts at two different strike prices.
The good news about this trade idea is that it benefits whether XLY pulls back a little bit or not. (The setup for the Dollar Slots play is a little different.)
“It would be ok for XLY to dribble a bit back in price, but so long as it holds the short leg price of the spread or above at expiration the trade should work,” Tom helpfully explains.
This is one of those trades where pocket change turns into a nice mid-range dinner out. (Do not go to Tacos Tolteca. It is gross.)
“$11 per contract may not seem like much, but 10 contracts have the potential for $110,” Tom says.
“The risk on this $1-wide spread is the $1.00 per contract offset by the credit brought in of $0.11, so the max risk is $0.89 or $89 per contract. $0.11/$0.89 = 12.36%. For 8 trading days!
“That exceeds my goal of liking to average more than 1% a day on selling to open credit spreads; put or call credit spreads.”
Here’s what Tom sees on his magic scanner:
And here’s what to do:
Nickel Slots Action to Take BUY-to-OPEN the XLY October 15, 2021 $177 Put (XLY211015P00177000) and SELL-to-OPEN the XLY October 15, 2021 $178 Put (XLY211015P00178000) for a net credit of $0.11 or $11.00 per contract Enter as a Good-til-Canceled (GTC) order |
“Dollar Slots” is a straight call, but you might want to wait to get in until XLY trades a bit lower.
“I would like to wait to see if XLY pulls back to maybe the 50-day SMA to then buy to open,” Tom says. “But if you see follow-through from here without a pullback, that’s your decision.”
One of those “with great power comes great responsibility” scenarios! I love those. Use your gift wisely.
Here’s Tom’s scanner screenshot:
And here’s what to do:
Dollar Slots Action to Take BUY-to-OPEN XLY November 19, 2021, $184 Call (XLY211119C00184000) for a limit of $5.00 per contract. Enter as a Good-til-Canceled (GTC) order |
In the end, though, this is really all thanks to Janet Yellen.
I see you, I appreciate you, and I apologize on behalf of Marty Fartman. Please accept my apologies, and also this small piece of uranium glass. (Don’t touch it directly.)
Have a great weekend. As my child says with a bizarre Southern accent that truly came out of nowhere, “IT’S FALL Y’ALL!”
Oh – and don’t forget to sign up for Kenny’s live earnings event on Wednesday. There’s a lot of money on the table, which I personally need ASAP.
See you there!
Liz